Monday, September 26, 2011

Singapore has little entrepreneurs 2

Entrepreneurs are created out of state policy. Development of countries in Asia Pacific roughly falls into two model. Taiwan, S Korea, Japan fall into the north east Asia model, while the rest including Singapore, HK belongs to the south east Asia model. China is a hybrid in between the two.

Exploitation of workers, exporting capitals and products to the western countries in suppression domestic population is their deadly flaws that are increasingly unsustainable. Nevertheless, the north east Asia model works better than the south east Asia model.

The north-east Asia model that worked (better)

The model develop from Japan which was under the threat of colonialism by western power. Industrialization was deemed the solution to fend off the imperialist. Besides, the then patriotic elites carried out land reforms that distributed land to the peasants against their own interest, in order to make the country strong. Government contracts were given to talented indigenous businessman, especially in industries. Banks were ordered by government to fund the projects. The government does not interfere much in the running of companies.

All sorts of protectionism were erected shielding the early stages industries from foreign competition and policies were erected to prevent foreigners from owning controlling stakes in the indigenous company.

These state sponsored companies train a large army of reserve managers, scientist and engineers. Without significant GLCs, the government contracts encourage the emergence of talented contractor. All these provide a fertile ground for aspiring entrepreneurs that eventually create one of the biggest economics miracle in history. These are achieved with low GINI of 0.38, 0.31, 0.33 respectively for Japan, Korea and Taiwan.

These countries have build a huge reserves of indigenous production capacity that whatever economics turbulence happened, they are able to survive by producing stuff. The problem of Greece today is because it is not producing anything.

The lesson we can learn
Great enterprises do not pop out from nowhere. If Korea or Japan had adopted the model of politiking GLCs, deliberately starving entrepreneurs from capitals and government contracts, they would not have MNCs like Samsungs.

True indeed, many in Japan and Korea are Zaibatsu or Chaebol. None the less, these are still many times better and less wicked than those backbiter we seen in our GLCs. While our nefarious GLCs has squandered the wealth from us, the north Asian conglomerates have somehow redeem themselves a little by building internationally competitive giants.

Free market competition works only in certain cases. If USA did not employ protectionism in early industrialization, their nascent industries will be crush. Apple did not grew solely out of garage, but rather by tapping the engineers trained during their work on government contracts.

2 comments:

Jonas
said...

I concur. There are too many ex-civil servants within our GLCs. Artificial 'businesses' lack the drive or 'animal spirits' that characterize privately held counterparts in East Asia. We went down the state-initiated corporations, too late to turn back now.